A Less Taxing Process

Service providers now have a definite framework for determining where wireless services are subject to tax under the Mobile Telecommunications Sourcing Act, signed into law on July 28.

Before the sourcing act, determining tax jurisdictions for interstate telecommunications services was based on the two out of three rule, which was established in Goldberg vs. Sweet for landline communications. In Goldberg, the U.S. Supreme Court ruled that the Illinois Tax Act imposing a telecommunications excise tax on interstate telecommunications is constitutional. The act taxed interstate telecommunications that were originated or terminated in Illinois or that were charged to an Illinois service address, regardless of where the telephone call was billed or paid. The two out of three rule means that states could tax interstate telecommunications where two of the three Goldberg factors coincided.

Although this rule works reasonably well in the world of landline telecommunications, wireless presents additional challenges because of the equipment's mobility. It currently is impossible to determine the precise origination or termination of every wireless call. In fact, a single wireless call may occur in a number of tax jurisdictions, for example, when a caller places a call in one locality or state and travels to another locality or state during the duration of the call. Under the two out of three rule, certain wireless calls might have been untaxed while others might have been taxed by multiple jurisdictions.

The Mobile Telecommunications Sourcing Act simplifies the process by creating a specific set of rules targeted to wireless services. The law states that wireless calls shall be taxed only at the customer's place of primary use "regardless of where the mobile telecommunications services originate, terminate, or pass through."

It defines the place of primary use as the address where the customer most often uses the wireless service - his home or business - and it must lie within the licensed service area of the home service provider.

The law also provides guidelines for providers to determine the taxing jurisdictions that correspond to the place of primary use. It authorizes a state or designated database provider to create and provide an electronic database, which designates the appropriate taxing jurisdiction for each street address. Wireless providers are not liable for errors in the electronic database.

If the state does not provide such a database, the wireless provider is held harmless from liability if the provider "employs an enhanced zip code to assign each street address to a specific taxing jurisdiction ... and exercises due diligence at each level of taxing jurisdiction to ensure that each such street address is assigned to the correct taxing jurisdiction."

(c) Four 3G licenses will go up for auction in Singapore in February. Singapore will gain at least one new service provider as there are only three incumbent providers. Bidding will start at $85 million, but some of the revenue will return in the form of industry grants and incentives. If the price escalates to an extreme amount, SingTel said it will forgo the auction entirely. Hong Kong's Sunday Communications is expected to participate in the auction.

(c) Entries for the 2001 GSM Association Awards now are being accepted. The awards will be presented just before the beginning of the 3GSM World Congress in February. The six award categories include the GSM in the Community Award, Best GSM TV Commercial and the GSM Association Roll of Honour. The deadline is Jan. 5, 2001; entry forms can be obtained at www.gsmworld.com.

(c) Prepaid saves U.K. wireless users one-third of the cost of postpaid wireless service, according to Oftel. Overall wireless prices in the United Kingdom now are about one-third cheaper than they were a year ago.